Defying inertia: Employers’ role in boosting pension saving beyond the automatic enrolment default

The introduction of automatic enrolment (AE) in the UK is often viewed as a huge success for pension saving, with more than 22 million employees now saving into a workplace pension. However, the median contribution rate in Defined Contribution (DC) pensions remains at the 8% statutory minimum, and the first Pensions Commission’s expectation of employer and employee pension contributions increasing over time has not been realised. The relatively low saving rate means millions are forecast to face disappointment at retirement – an urgent and significant challenge that the new Pensions Commission will need to address.

In this context, the Standard Life Centre for the Future of Retirement commissioned new research by the Institute for Employment Studies to look at the role of employers in pension saving, and what they can do beyond the legal requirements in the AE system, especially to support low-to-middle earners balance affordability and adequate retirement provision. Through a rapid literature review, and in-depth interviews with pension experts and employers, the research assessed the feasibility of different options for employers, both within the current system and under potential future policy change, to better support workers to save for an adequate pension. These findings informed the report’s recommendations for employers, the Pensions Commission and the UK government, aimed at improving pension outcomes particularly for low-to-middle earners.

Key findings

Inertia helps boost participation but keeps saving levels low. Interviewees consistently acknowledged AE as an important behavioural nudge, but many said it has unintentionally set the minimum rate as the default, even if this is unlikely to deliver adequate incomes in retirement. The challenge to balance immediate financial pressures and long-term saving needs is especially acute for low-to-middle earners, with some seeing pension contributions as unaffordable. Employers find it more difficult to engage staff who experience financial hardship or instability on long-term saving.

Employers want to support pension saving but struggle to prioritise. There was a consistent call for the government to set out a clear, reasonable and phased timetable for any future changes to the AE system so that employers can plan with confidence. Employers recognise the undersaving problem and want to play a constructive role. However, they highlighted significant constraints and expressed varying views on how increased saving should be achieved. The existing 2017 AE review recommendations, the new Pensions Commission’s review currently underway, and increasing hiring costs (notably National Insurance rises) have all added moving parts to what the right approach should look like.

The Pensions Commission has an opportunity to build consensus. The Pensions Commission’s review is an opportunity to bring together employers, workers, and industry to shape the next phase of AE. There is consensus about topics that need to be urgently addressed, including:

Coverage of AE: Employers and experts highlighted ongoing gaps in who is brought into AE. Part‑time workers, those with multiple jobs, younger employees, and people with fluctuating hours continue to fall outside the system. While some employers proactively nudge entitled workers to join a pension, interviewees argued that expanding coverage, particularly through implementation of the 2017 Review recommendations, remains essential to improving long‑term outcomes.

Minimum default level: Most interviewees agreed that current minimum contribution levels are insufficient for a financially secure retirement for many savers. However, there was concern about raising contribution rates too quickly, particularly during a period of economic pressure. Interviewees favoured a phased approach, and mitigations will be needed to avoid risking an increase in opt-out. Employers also highlighted the need to improve communication to help employees understand the long-term benefits of pension saving to encourage engagement.

Incentives to support saving adequacy: Many employers are already using measures such as salary sacrifice, or opt-down options, to complement employee contributions. Despite being positive about options like auto-escalation and sidecar savings, adoption rates and awareness remain low with complexity and administration cost frequently cited as barriers. Broader workplace financial wellbeing support is offered by some employers but not tied into pension engagement in the workplace. There is room to discuss how the government could incentivise good employer practice, as well as employers’ role in supporting financial adequacy, alongside individuals’ responsibilities.

Employer interviews also provided valuable insights into what employers can do today to help their workforce to save for the long term, while also supporting their financial wellbeing. Some practical examples include:

Understand workforce needs: Regularly assess employees’ financial wellbeing – for example, through staff surveys or feedback tools – to identify pressures and tailor support.

Support further options to increase contributions: Offer choices to opt down or automatically increase contributions linked to career progression, coupled with proactive nudges for workers to join or rejoin pension schemes.

Use timely, targeted communication: Engage employees during key moments, such as at pay reviews, promotions, or life events, to prompt them to review their pension and wider benefits.

Simplify pension information: Use clear, jargon-free language and simple illustrations to help employees understand contribution options and long-term implications.

Integrate pensions with wider financial wellbeing support: Align pension communications with financial wellbeing initiatives to help employees balance immediate financial needs with long-term planning.